The Staton Jones Report

As crude spot prices on NYMEX topped $48/bbl today (actually flirting with $49 before receding slightly to a session close price of $47.64), we would do well to ponder very seriously what the end of cheap oil means for every man, woman and child on the planet. In a contemporary setting, it seems almost hackneyed to suggest this, yet I can't escape a feeling that most folks really don't understand what this means.

The end of cheap oil? Could it be? While more and more economists are coming around to serious consideration of what petroleum experts have been hinting at (and, at times, screaming about), there is still no shortage of optimists to prop up the belief that we are fairly swimming in oil. But, if the recent rise of oil prices hasn't proven sufficient to do so, an article at Ocnus.net (while somewhat crudely presented) provides us with reason to re-evaluate our addiction to free-flowing, cheap oil.

"'At Ghawar,' he said, 'they have to inject water into the field to force the oil out,' by contrast, he continued, Shayba's oil contained only trace amounts of water. At Ghawar, the engineer said, the 'water cut' was 30%."

"The hairs on the back of my neck stood up. Ghawar's water injections were hardly news, but a 30% water cut, if true, was startling. Most new oilfields produce almost pure oil or oil mixed with natural gas--with little water. Over time, however, as the oil is drawn out, operators must replace it with water to keep te oil flowing --until eventually what flows is almost pure water and the field is no longer worth operating."

"Ghawar will not run dry overnight, but the beginning of the end of its oil is in sight."

But this year at the Offshore Technology Conference some were talking about a 55% water cut for Ghawar.

To put this into perspective, check this out...

"BEIJING, Aug 13 (Reuters) - Chinese crude imports, up 40 percent so far this year, show no sign of slowing despite high oil prices and government efforts to calm economic growth, latest monthly import data showed on Friday."